Editor’s Note: The following article was written by the Attorney General of Connecticut; note the absence of inflamatory statements wrapped in illusions, merely stark factual information.
George Jepsen
Attorney General, Connecticut
Journal Enquirer.com
Antitrust enforcement must be exercised with caution
I write to dispute Chris Powell’s Aug. 24 column, “Stop hospital mergers, enforce antitrust law.” Powell’s assertion that my office has been lax in antitrust enforcement in hospital mergers and other health care issues is wrong.
Connecticut is recognized nationally for its antitrust enforcement. For the 2½ years I have co-chaired the antitrust section of the National Association of Attorneys General, I have been proud to carry on my office’s great work. My office continues to lead successful antitrust enforcement efforts, on par with those of much larger states.
A few examples:
— Most recently we took a lead role with Texas in the investigation of price fixing by e-book publishers and Apple, and led a multistate coalition that prosecuted a successful antitrust trial against Apple for manipulating the e-books publishing market. We expect the remedies in that case to benefit consumers by restoring competition and prevent the illegal behavior from continuing. Settlements with five other book publishers in the scheme have recovered approximately $164 million for consumers nationwide.
— Connecticut and New York formed a task force in 2008 to investigate allegations that certain large financial institutions, including national banks and insurance companies, and certain brokers and swap advisers engaged in schemes to rig bids and commit other deceptive conduct in the municipal bond derivatives market. The task force has entered into settlements with five financial institutions: Bank of America, UBS, JPMorgan Chase & Co., Wachovia Bank, and GE Funding Capital Market Services Inc. The task force has obtained settlements worth almost $350 million for the participating states, including more than $4 million for Connecticut and certain municipalities and not-for-profit entities.
— Connecticut and New York are the lead states in an investigation into alleged anticompetitive conduct related to potential rigging and manipulation of benchmark interest rates, including LIBOR.
We do not and will not shrink from an antitrust fight when the facts and law support it.
But government authority to enforce the antitrust laws, including the review of hospital acquisitions, must be exercised with caution, never cavalierly, and only when firm evidence demonstrates that consumers may be harmed by reduced competition. Before filing an action in court to enjoin a merger, we also must consider whether the action could harm the business financially, as well as its employees and communities.
While we have engaged in antitrust reviews of a number of hospital mergers in Connecticut in recent years — the merger of Yale-New Haven Hospital and the Hospital of St. Raphael; Hartford Hospital’s acquisition of William Backus Hospital in Norwich, and Danbury Hospital’s proposed acquisition of Norwalk Hospital — we have not been presented with a transaction that creates sufficient competition concerns to justify blocking it.
You should not mistake this for complacency. Before concluding that none of those transactions was anticompetitive, my office completed a review that included examining thousands of pages of documents, interviewing key players, discussions with employers and payors, conversations with advocates and community leaders, consultations with economists and other experts, and cooperation with the Federal Trade Commission.
The Herfindahl-Hirschman Index was among the factors considered in these reviews. Powell’s column noted the observation by the Manhattan Institute’s Avik S.A. Roy that the HHI indicates that most hospital markets are ‘highly concentrated.’” The implication is that this may be true in Connecticut.
But certain steps must be taken to determine an accurate HHI measurement, like determining the relevant product and geographic markets. HHI thresholds are not intended to be applied as rigid screens, and other competitive factors must be examined to determine whether increased concentration at any level will harm competition.
We remain confident that the Connecticut hospital mergers proposed so far were not anticompetitive. And we will review future mergers for competition concerns.
We also are reviewing hospital acquisition of physician practices and outpatient facilities for competition concerns, including whether concentration of market power is used to raise prices.
Also, we opposed proposed legislation that threatened higher healthcare costs or anti-competitive effects. For example, in 2011, 2012, and 2013, we led opposition to legislation seeking to allow cooperative arrangements between competing healthcare providers. The federal Affordable Care Act, with its focus on integrating healthcare and expanding insurance coverage, will continue to present novel and complex competition issues requiring careful evaluation.
Powell is right that my office has substantial oversight responsibility regarding the transfer of assets of nonprofit hospitals to for-profit entities under the state Hospital Conversion Act. Vanguard Health Systems’ acquisition of WaterburyHospital is the only nonprofit hospital conversion that has been formally presented for review.
This is not an antitrust inquiry. My charge under the Conversion Act is to safeguard the nonprofit hospital’s charitable assets. In considering the viability and reasonableness of any sale, my office must consider: whether the hospital exercised due diligence in deciding to sell, selecting the buyer, negotiating terms of the sale, and addressing conflicts of interest; whether the hospital received fair market value; and whether the financing results in a risk to hospital assets.
The same statute charges the state Department of Public Health’s Office of Health Care Access with evaluating access-to-care issues.
While the Waterbury transaction represents a transfer in ownership of one hospital, it does not involve the consolidation of two or more hospitals in a given market. It would be unwarranted and contrary to my responsibilities under the Hospital Conversation Act to impede this particular transaction because of concerns about general trends in healthcare competition.
When any particular conversation does raise competition concerns — for example, if an existing for-profit hospital seeks to acquire a non-profit in the same market — my office can and will exercise its enforcement authority to ensure the transaction does not violate antitrust laws.
My staff and I are committed to enforcing the law fairly and responsibly to protect the interests of the state and the people.
The writer is the attorney general for the state of Connecticut.